What Do You Want? - Setting Financial Goals and Objectives

So now you’ve sketched your financial profile - a portrait of how you live today, you know how much you’re worth and you know what cash comes in and what goes out. But what about your goals and objectives?.

Goals are broad forecasts of what you want to achieve. An example ‘I want a comfortable retirement’. Objectives are more specific and tired to a time frame. ‘I want to retire on December 31 2012 with an income of GHc50,000 ($50,000) a year’, for instance.
The big picture
Not surprisingly, it’s easier to figure out what you really want in life if you take one step at a time. So you should paint the big picture – your goals – first. Then you can worry about filling in the details – your objectives – later.

As with every other part of the financial planning process, it’s important to commit your information and ideas to paper. So get out a pad of paper and pencil and write ‘Goals’ across the top of the page. Then jot down your list.
I recommend that you keep this page and all the other elements of your financial plan in a loose – leaf notebook. When it comes time to review your plan in six months or a year, you can easily update the individual parts.

Maybe you have only one goal – to save for retirement. Or maybe you have twenty. You are unique, so the details of what you want are unique as well. But it has been found out that five general goals apply to just about everyone. Here they are:

Goals 1: Protection Against Risk
What you want:
· Establish an emergency fund
· Purchase adequate insurance

Goals 2: Financial Security for Your Family
· What you want:
· Meet all family financial obligations without straining resources.
· Provide for care of all dependants
· Fund family tuition needs
· Aid children in their careers or car or home purchase
· Provide for special needs, such as the care of an elderly person

Goals 3: A Comfortable standard of Living
What you want:
· Travel frequently
· Purchase a new home or make improvements to your existing one
· Buy a vacation house
· Help finance special celebrations, such as weddings
· Entertain your family and friends
· Enjoy cultural events

Goal 4: A Secured And Comfortable Retirement
What you want:
· Keep the same standard of living you had during your working years
· Maintain financial independence during retirement
· Achieve financial security so that you may retire early
· Shield yourself from financial disaster in case of medical emergency

Goal 5: A Well- Planned Estate
What you want:
· Provide for our spouse
· Provide for dependents
· Arrange for the continued management of your assets
· Minimize estate taxes and estate management fees
· Make charitable bequests

Two points to keep in mind: the importance of each of these goals will change as you change and grow. For example, if you’re twenty-five years old, your priority is more likely ‘a comfortable standard of living’ than ‘a well-planned estate’’

And sometime unanticipated changes can make a big difference in your financial plans. For instance, a divorce might necessitate a change in your tax and employee benefits strategies. A new marriage might prompt you to change your will. The birth of a child might cause you to take a hard second look at your insurance and estate planning objectives.

Also the goals I listed, form the core of most financial plans - but they are not the only ones you should include. Your goals are uniquely yours. For instance, one of your goals might involve the lifelong care of a disabled child. In the final analysis, you – and you alone- must decide what you want.

What Next?
You’ve set your goals, now it is time to establish your objectives. Go back to your original list of goals, and construct a chart that looks something like this:

Goals 1: Protection Against Risk
Objectives: Establish an emergency fund
When: Three years from now
Cost: GHc5,000 ($5,000)

Goals 2: A Comfortable Standard of Living
Objectives: Purchase a second home
When: Five years from now
Cost: GHc20,000 ($20,000)

Your list, of course, will be much longer, more detailed, and more specific. Be sure you schedule short-term objectives as well as long-term goals.
Once you set your goals and objectives, your must measure your progress. With short-tem objectives, it’s easy and obvious. For example, you can readily see if you’ve met your objective of accumulating GHc5,000 ($5,000) in emergency cash fund.
It is not so simple to know if you’re on the right part to achieving your long-term goals – planning adequately for a comfortable retirement, as an example. So you must set bench marks along the way.

Remember too, that you should review your list of goals and objectives at regular intervals – at least once a year – and update it as your circumstances change.

Email me with any queries or comments.

How Do Get what You Get What You want?

So far we have dealt with two of the most important and arduous parts of the financial planning process. You’ve learned how to develop your personal financial profile. And you’ve figured out how to set your personal financial goals and objectives.
Now let’s look at different strategies that you can use to achieve the aims you’ve set for yourself. I will start in this post by showing you how to adopt strategies that match your financial profile and your goals and objectives.

Strategic Planning
When you set your objectives, chances are you found yourself focusing on eight key areas. Your objectives related to:
1. Investments
2. Dept management
3. Insurance
4. Tax planning
5. Children’s education and other family matters
6. Company Benefits
7. Retirement
8. Estate planning
My subsequent posts will be touching on strategies to handle these eight key areas.

Dollars and Sense
To see how to get what you want, transform the list you made when establishing your goals and objectives with price tags, timetable, and broad strategies attached to them.
The table below shows you how much GHc1 (1$) invested at certain interest rates can grow over a specified number of years.
Now, here’s what your goal/strategy outline might look like. Remember, the following is only an illustration. It is not meant as model.

Goal 1: Protect Against Risk
Objectives: Establish an emergency fund
When: Three years from now
Cost: GHc5,000 ($5,000)
How: Invest GHc130 ($130) a monthly for thirty-six months at 6%

Goals 2: A Comfortable Standard of Living
Objectives: Purchase a second home
When: Five years from now
Cost: GHc20,000 ($20,000)
How: Invest GHc150 a month for 8 years at 10%

Let me summarise the steps you should take in order to get what you want. First, set goals, next, set your objectives. Finally determine your strategy. And if you discover that the strategy you choose does not work? Go back to the drawing board and sketch out a new one.

Following Through
After you develop your goal/strategy outline, you much implement and follow through on your plan, and you much update it as your life and circumstances change.

What’s critical is writing down a time goal for meeting your entire objective. And, since the same principles apply to every aspect of a financial plan, you should target times for reaching even the shortest-term objectives – buying a new set of jewellery or golf clubs for example. Finally at the end of each year, you should challenge and evaluate your priorities.

Don’t be afraid to modify, expand, contract and change your plans. Update your plan at least every few months for your short-term objective and every year or so for your long-term objectives. I recommend keeping your old plans behind your new ones so you can see how your goals and objectives change over the years.

If you follow these simple rules and concentrate on breaking down the three key financial planning questions – what do I have? What do I want? How do I get what I want? – Into logical, manageable bits, you can achieve your goals.

Keep in mind, too, that you can ask financial planners for help, periodically consult with other professionals, and turn to magazines, newsletter and of course my blog – but remember you are the only one qualified to define and refine your plan.



Email me with any queries or comments.